How to make the transferability market work for project developers

In recent weeks, we’ve discussed what to expect to encounter in a first transaction and a timeline for a transaction in transferable tax credits. 

This market is new and evolving in real time, so our team is motivated to share our experiences with developers to help inform their decision making. The best way to study this market, however, is to test it themselves, assessing buyer preferences for key components — like price, terms, and timing — before committing to a path forward.

Transferability has opened up a much wider market of potential buyers, providing a substantial benefit: it offers project developers the chance to look at a broader pool of potential partners, obtain competitive pricing for their credits, and optimize deal parameters to meet a developer’s needs.

Optimizing value for tax credits is about more than price. We know that developers care about several key parameters when monetizing their tax credits, such as: 

• pricing and other key deal terms like payment timing; 
• certainty of deal execution; 
• speed and simplicity; and 
• cost of execution.

We increasingly see developers running competitive sales processes to optimize on these variables, but managing these processes manually can be time intensive for busy teams. Some developers have resorted to working with repeat buyers to avoid concerns about confidentiality and to optimize for transaction certainty. This is not always possible, and without testing the broader market, developers may also be sacrificing on price. 

How can developers test the market in a low risk way?

This new market requires a new go-to-market strategy. Developers who anticipate having credits for sale in 2024 and beyond should test the market early. Putting feelers out to assess market appetite and price for tax credits is a low risk process. Developers should:

• Get as much data from the market as possible, as quickly as possible.
• Intentionally pursue either a structured auction or elect to review bids on a first-come first-served basis. Either approach can yield valuable information and forge new relationships, but indecision can breed uncertainty for both seller and buyer.
• Leverage partners to get market data quickly, and identify where  a competitive process can deliver optimal results.

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How does transferability offer the best return for developers?

With diversified non-binding bids and more clarity into market pricing for their credits, project developers have more and better information to support and guide future financing decisions. Developers may not know from the start if they’ll monetize credits through transferability, tax equity partnership, or a more complex joint venture structure. The most accurate way to gauge the market and make that decision is by testing it themselves.

How does Crux enable this? 

Developers on the Crux platform can list their projects in less than 10 minutes with no fees and no exclusivity commitment required. Our software is designed to maintain confidentiality, and sellers need not have every detail hammered out before taking stock of the market. Finally, project developers can receive non-binding indications of interest from prospective credit buyers across the widest cross-section of the market on Crux. From there, they are better informed to choose a path forward and get organized for the next steps of a transaction.

In addition to greater price transparency, developers are exposed to new potential partners and relationships through their interactions with buyers, intermediaries, and buyer advisors in the Crux ecosystem. Our sophisticated market team can support this process through introductions to leading insurers, attorneys, and other service providers, and can advise developers through running a sales process to solicit bids for their tax credits. We work closely with our developer partners to understand their projects and help them solicit bids.

To begin exploring the market, and get in touch with us today.